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How Cryptocurrencies Have Become So Popular

If there’s a hot topic in the last twelve months, it is Cryptocurrency Trading – market volatility, new types of cryptos and what the future will really holds. Even if you aren’t involved in trading these new currencies, you will hear about them on the news, from other traders and on forums. So, how have cryptocurrencies become so popular?

Cryptocurrencies – the basics

Let’s start with a few basics if you are new to the asset. Cryptocurrencies, with Bitcoin being the most famous, work on a technology called blockchain. It makes transactions so secure that many experts believe they are ‘un-hackable’ and this is what gives them that all-important edge.

Cryptocurrency Trading

Transactions are assured, the cost of verifying them is less than with a central bank and they happen between individuals. It means that every time a person makes a cryptocurrency transaction, it is recorded on a digital ledger – the blockchain. Each cryptocurrency has its own blockchain and a series of computers doing very complex maths to maintain it.
Once a specific number of transactions are made, they are grouped into a block. To send the block and add the transactions to the blockchain, the computer needs to solve a problem called a cryptographic function.

Cryptocurrency mining

Another term you may hear a lot of is cryptocurrency mining – or crypto-mining. It is the process whereby cryptocurrency transactions are authenticated and recorded on the blockchain digital ledger. People who ‘mine’ cryptocurrency use computers with specialised, complex, hardware and are responsible for making sure the information is correct and recorded accurately. The ‘mining’ process entails crypto-miners battling with one another to solve complex math scenarios using cryptographic hash functions. The miner, who cracks the code first, is then allowed to authorise the transaction – and awarded a small sum of cryptocurrency for their efforts.

Bitcoin and more

While Bitcoin takes centre stage as the most well-known of the cryptocurrencies, it is by no means the only one out there. In fact, there is a whole range, often known as ‘altcoins’ that are either modified or improved versions of Bitcoin. Some of the big names include:

· Litecoin – launched in 2011, it was created by a former Google engineer as an open source global payment network using a ‘scrypt’ as proof of work. It has faster block generation and transactions confirmation as well as a growing number of merchants who accept it.

· Ethereum – launched in 2015, it is a decentralised software platform that uses Smart Contracts and Distributed Applications to build and run the currency without downtime, fraud or third-party control. It has a platform-specific token, the Ether, and it is currently in second place in terms of market capitalization after Bitcoin.

· Dash – launched in 2014, it was originally called Darkcoin and is the more secretive cousin of Bitcoin. It was developed by Evan Duffield.

· Ripple – released in 2012, it offers low cost international payments that are made instantly and doesn’t need mining, making it different from other cryptos.

Cryptocurrency Trading

For many of us, the most interesting element about cryptocurrencies is their potential for trading. That’s why Cryptocurrency Trading remains such a hot topic. There are various approaches to take, the most popular being to buy and sell the currencies or to use CFD (Contract for Difference) trading to make money from them. The biggest advantage with CFD trading is that you don’t need to own the cryptocurrency to trade with it. You can make a profit by trading on whether it will increase or decrease in value, and you only have to leverage a small percentage of the total value to do this. It also insulates you somewhat against those dramatic falls in value that would impact the value of the currency if you had bought it.

If you want to know more about cryptocurrency CFD trading, check out the information pages on Olsson Capital and start learning your trading strategy today.